No recovery, but benefits suspended

By Colin Gordon

Unemployment insurance is primarily a state responsibility but, in any severe or prolonged stretch of economic recession, the states rely on federal assistance. 

This can take the form — as in the various provisions of the Families First and CARES Acts — of federally funded expansions or extensions of eligibility, supplemental benefits, or grants to cover administrative expenses. 

A key element of this assistance is the extended benefits (EB) program, which offers an additional 13 weeks of benefits (half paid with federal dollars) and “triggers” on when the state’s insured unemployment rate (the share of the workforce receiving unemployment insurance) is above 5 percent for 13 consecutive weeks. 

The EB “trigger” is a notoriously clumsy tool, but it flipped “on” in almost every state this spring. On Friday, the Department of Labor announced that Iowa’s extended benefits had triggered off — a development that Iowa Workforce Development cheered as evidence of “Iowa’s economic recovery.” The EB will stop paying claims at the end of October, even if recipients have not received the full 13 weeks of benefits. 

Wait, what recovery? While Iowa has ground its insured unemployment rate down under 5 percent, that metric is a pretty dubious indicator that the labor market has rebounded to anything close to normal. The insured unemployment rate is as much a reflection of policy as it is as the health of the economy. It does not count those who applied for benefits but were turned down, those who have exhausted their benefits, or those who — in the face of an unrelenting virus, a lousy job market, and a cascade of familial obligations — have given up looking for work entirely.

Let’s consider the real numbers. In September (the most recent month available), based on the survey data that generates our monthly unemployment measure, about 75,800 Iowans were unemployed. According to the administrative data from the unemployment insurance program itself, in the week of October 17th (the most recent week available) about 46,500 — about 60 percent of the unemployed — were receiving benefits. Surely the actual unemployment rate — and not the share of those that manage to navigate an increasingly tight-fisted claims process — is the better measure of recovery.

Even more dramatic is the collapse in the size of the labor force. While 75,800 Iowans are out of work and looking for a job, nearly twice as many (almost 144,000) have dropped out of the labor force entirely since February. If we include these discouraged workers as effectively unemployed, the state’s unemployment would 12.5 percent — close to its COVID recession peak, and a long way from recovery.

The loss of extended benefits is one more blow for an already beleaguered workforce. The $600 PUC bump in weekly unemployment benefits evaporated in July, the Lost Wages Assistance program cobbled together out of FEMA funds lasted just a few weeks

While the prospect any new federal stimulus program looks slimmer each day, rates of food and housing insecurity in Iowa are climbing. The “insured rate” recovery is a statistical artifact; it’s a measure of the weakness of our social safety net and not of economic security or prosperity experienced by working Iowans. 

Colin Gordon is senior research consultant for Common Good Iowa, a new organization created by the merger of two nonpartisan policy organizations, the Iowa Policy Project and the Child and Family Policy Center. Gordon is a professor of history at the University of Iowa and a respected analyst on work and economic issues, particularly those facing low-income and marginalized groups in Iowa and the Midwest.

Also from Colin Gordon:

The State of Working Iowa 2020

Race in the Heartland: Equity, Opportunity and Public Policy in the Midwest